Taxes & Government Spending
Chapter 14 Section 1What are Taxes?
Taxes & Government Spending
Objectives: Understand how the government uses
taxes to fund programs. Identify the roots of the concept of
taxation in the United States Constitution. Describe types of tax bases and tax
structures. List the characteristics of a good tax. Identify who bears the burden of a tax.
Taxes & Government Spending
If you look at all taxes taken from your paycheck, it can be a bummer.
Frustration over taxes, is what led the American Colonists to go to war against Britain and declare their independence.
Taxes & Government Spending
Money taken from your paycheck, it is not done without your
consent. As citizens of the United States, we
authorize the government, through the Constitution and our elected representatives in Congress, to raise money in the form of taxes.
Taxes & Government Spending
Funding Government Programs A TAX is a required payment to a local,
state, or national government. Taxation is the primary way that the
government collects money. Taxes give the government the money
needed to operate. Revenue – income received by a
government in the form of taxes and other non-tax sources.
Taxes & Government Spending
What is a Tax?
What is Revenue?
Taxes & Government Spending
Tax A payment to any local, state, or
national government Revenue
income received by a government in the form of taxes and other non-tax sources.
Taxes & Government Spending
Without revenue from taxes, the government would not be able to provide the goods and services that we not only benefit from, but that we expect the government to provide.
Provide things like… Education National Defense Highways Law Enforcement
Taxes & Government Spending
List one way that the money from revenue is spent by a governmental body?
Taxes & Government Spending
List one way that the money from revenue is spent by a governmental body?
Education National Defense Highways Law Enforcement
Taxes & Government Spending
Taxes & the Constitution Taxation is a powerful tool. The founders of the United States did
not, without careful consideration, give their new government the
power to tax. The Constitution they created spells out
specific limits on the government’s power to tax.
Taxes & Government Spending
1. Power to Tax+ Article I Section 8 Clause 1
To lay and collect taxes, duties, Imports, and excise, to pay the debts, and provide for the common defense and general welfare of the united States; but all duties, imports, and excises shall be uniform throughout the United States.
Taxes & Government Spending
What gives the Government the power to tax the people?
Taxes & Government Spending
U.S. ConstitutionArticle I Section 8 Clause 1
Taxes & Government Spending
2. Limits on the Power to Tax+ Constitution limits certain kinds of
taxes.1. the purpose of a tax must be for
the “common defense and general welfare”.
A tax cannot bring money to an individual
2. Federal taxes must be the same in every state.
Taxes & Government Spending
Tax Bases and Tax Structure Tax Base - is the income, property,
good, and service that is subject to a tax.
Income – Individual Income Taxes Property – Property Taxes Good & Service – Sales Taxes
Taxes & Government Spending
Name three types of taxes that our country has?
Taxes & Government Spending
Name three types of taxes that our country has?
Income Property Sales
Taxes & Government Spending
Proportional Tax – a tax for which the percentage of income paid in taxes remains the same for all
income levels. i.e. a state income tax is 6% of your
individual income. Progressive Tax – a tax for which the
percentage of income paid in taxes increases as income increases.
i.e. the US federal income tax
Taxes & Government Spending
Regressive Tax – a tax which the percentage of income paid in
taxes decreases as income increases.
i.e. the sales tax The higher-income households spend a
lower proportion of their incomes on taxable goods and services.
Taxes & Government Spending
Characteristics of a Good Tax A good tax should have four
characteristics1. Simplicity – it should be simple
and easily understood by everyone2. Efficiency – the government
should be able to collect the taxes without spending too much time or money.
Taxes & Government Spending
Characteristics of a Good Tax3. Certainty – it should be clear to the
taxpayer when a tax is due, how much money is due, and how the tax should be paid.
4. Equity – the tax system should be fair, so that no one bears too much or too little of the tax burden.
Taxes & Government Spending
What are the 4 characteristics of a good tax?
Taxes & Government Spending
What are the 4 characteristics of a good tax?
Simplicity = Easy to understand Efficiency = Easy to collect Certainty = Clear when and how much you owe. Equity = Fairness
Taxes & Government Spending
What is a regressive tax?
Give an example.
Taxes & Government Spending
What is a regressive tax? a tax which the percentage of income
paid in taxes decreases as income increases
Give an example. Sales Tax
Taxes & Government Spending
What is a progressive tax?
Give an example.
Taxes & Government Spending
What is a progressive tax? a tax for which the percentage of
income paid in taxes increases as income increases.
Give an example U.S. Federal Tax System
Taxes & Government Spending
What is a proportional tax?
Taxes & Government Spending
What is a proportional tax? a tax for which the percentage of
income paid in taxes remains the same for all income levels.
Give an example State Income Tax
Taxes & Government Spending
Defining Fairness Two proposed ideas
1. Benefits-Received Principle - A person should pay taxes
based on the level of benefits he or she expects to receive.
- People who drive should pay the gasoline taxes that are used to build and maintain highways.
Taxes & Government Spending
2. Ability-to-Pay Principle- People should pay taxes
according to their ability to pay.
- This is a progressive tax plan –
individual income taxes.
Taxes & Government Spending
Who Bears the Burden of a Tax? The people who pay the tax The business who collects the tax and
sends it into the government. Incidence of a tax – who will pay the
final burden of the tax. When policymakers consider a new tax,
they examine who will actually bear the burden. Sometimes the consumer bears it and sometimes the business has to bear it.
Taxes & Government Spending
What is a incidence of tax?
Taxes & Government Spending
What is a incidence of tax? who will pay the final burden of the tax.